DCIT, CHENNAI V. Ganapathy Media P Ltd., CHENNAI

ITA 1286/CHNY/2013

• Counselvise Citation: 128621714 RSA 2013
• Duration Of Justice: 2 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 10-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PATHLAVATH PEERYA
• Assessee Lawyers: SANDEEP BAGMAR R
• Section: 194C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.1286/MDS/2013 & C.O. NO.158/NDS/2013 (IN I.T.A. NO.1286/MDS/2013) ' (' / ASSESSMENT YEAR : 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, MEDIA CIRCLE I, CHENNAI - 600 034. V. M/S GANAPATHY MEDIA PVT. LTD., # 3/6, M.G.R. SALAI, VIJAYARAGHAVAPURAM, CHENNAI - 600 093. PAN : AACCG 8591 M ( APPELLANT) ( RESPONDENT & CROSS-OBJECTOR) REVENUE BY : SH. PATHLAVATH PEERYA, CIT ASSESSEE BY : SH. SANDEEP BAGMAR. R. - . /% / DATE OF HEARING : 14.05.2015 0'( . /% / DATE OF PRONOUNCEMENT : 19.06.2015 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: BOTH, THE APPEAL OF THE REVENUE AND CROSS-OBJECTI ON OF THE ASSESSEE ARE DIRECTED AGAINST THE VERY SAME ORDER O F 2 I.T.A. NO.1286/MDS/13 C.O. NO.158/MDS/13 COMMISSIONER OF INCOME TAX (APPEALS)-VI, CHENNAI, D ATED 24.12.2012. WE HEARD BOTH THE APPEAL AND THE CROSS -OBJECTION TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON O RDER. THE ONLY ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO DI SALLOWANCE OF ` 17,60,79,987/- UNDER SECTION 40(A)(IA) OF THE INCOM E-TAX ACT, 1961 (IN SHORT 'THE ACT'). 2. SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE PURCHAS ED COPYRIGHTS OF FILM FOR AN AMOUNT OF ` 22,01,25,000/-. HOWEVER, NO TAX WAS DEDUCTED EITHER UNDER SECTION 194C OR UNDER SECTION 194J OF THE ACT. ACCORDING TO THE LD. D.R., THE ASSESSEE CLAIM ED THAT THE TERM ROYALTY DOES NOT INCLUDE CONSIDERATION PAID FOR S ALE, DISTRIBUTION OR EXHIBITION OF CINEMATOGRAPHIC FILM. ACCORDING TO T HE LD. D.R., THE ASSESSEES FURTHER CLAIM WAS THAT IT WAS IN THE BUS INESS OF BUYING AND SELLING OF SATELLITE RIGHTS OF THE FEATURE FILM S. ON VERIFICATION, THE ASSESSING OFFICER FOUND THAT THE SO-CALLED AGREEMEN T OF ASSIGNMENT IS NOT AN AGREEMENT TO PURCHASE. THE LD. D.R. FURT HER SUBMITTED THAT THE ASSESSEE WAS DESCRIBED IN THE AGREEMENT AS ASSIGNEE AND NOT AS BUYER. THE ASSESSEE WAS GIVEN THE RIG HTS FOR A PERIOD OF 99 YEARS. THEREFORE, IT IS NOT A SALE. ACCORDI NG TO THE LD. D.R., IT IS ONLY GRANTING SATELLITE RIGHTS FOR THE MOVIE PRO DUCED BY THE 3 I.T.A. NO.1286/MDS/13 C.O. NO.158/MDS/13 PRODUCER. ACCORDING TO THE LD. D.R., IN VIEW OF TH E SATELLITE RIGHTS, THE ASSESSEE ONLY GETS A SPECIFIC RIGHT FOR SATELLI TE EXHIBITION. THEREFORE, THE JUDGMENT OF KARNATAKA HIGH COURT IN SAMSUNG ELECTRONICS CO. LTD. & OTHERS [2011] 16 TAXMANN.COM 141 IS APPLICABLE. 3. THE LD. D.R. FURTHER SUBMITTED THAT A MERE SATEL LITE RIGHT WITHOUT PERMANENTLY TRANSFERRING THE RIGHT TO THE A SSESSEE FOR A PARTICULAR PERIOD, IS SUBJECT TO DEDUCTION OF TDS U NDER SECTION 194J OF THE ACT. THEREFORE, THE CIT(APPEALS) IS NOT JUS TIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. THE LD. D.R. HAS ALSO P LACED HIS RELIANCE ON THE DECISION OF THIS BENCH OF THE TRIBU NAL IN ACIT V. SHRI BALAJI COMMUNICATIONS (2013) 140 ITD 687. 4. ON THE CONTRARY, SH. SANDEEP BAGMAR. R., THE LD. COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE WAS ASSIG NED THE RIGHT OF TELECASTING THE FILMS THROUGH SATELLITE FOR A SP ECIFIC PERIOD. REFERRING TO THE COPY OF THE AGREEMENT DATED 15.07. 2008, THE LD.COUNSEL SUBMITTED THAT THE ASSESSEE HAS APPROACH ED THE ASSIGNOR ONLY FOR ASSIGNING OF SATELLITE RIGHT OF T HE FILM. THEREFORE, ACCORDING TO THE LD. COUNSEL, WHAT WAS GIVEN TO THE ASSESSEE IS ONLY A RIGHT TO TELECAST THE FEATURE FILM FOR THE S ATELLITE MEDIA. HENCE THE PROVISIONS OF SECTION 194J OF THE ACT IS NOT AP PLICABLE. THE 4 I.T.A. NO.1286/MDS/13 C.O. NO.158/MDS/13 LD.COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE IS E NGAGED IN THE PURCHASE AND SALE OF SATELLITE RIGHT OF FEATURE FIL MS AS A TRADER FOR CONSIDERATION. THE SATELLITE RIGHT WAS GIVEN TO TH E ASSESSEE FOR 99 YEARS. ACCORDING TO THE LD. COUNSEL, THE LIFE OF A NY FILM IS LESS THAN 99 YEARS. THEREFORE, WHEN THE EXCLUSIVE RIGHT OF E XHIBITION IS GIVEN TO THE ASSESSEE, IT AMOUNTS TO SALE OF FILMS. THER EFORE, THERE IS NO QUESTION OF DEDUCTION OF TAX UNDER SECTION 194J OF THE ACT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ONLY ISSUE ARISES FOR CONSIDERATION IS WHETHER THE RIGHT TO TELECAST THE CINEMATOGRAPHIC FILM THROUGH SATELLITE IS A MERE ASSIGNMENT OF RIGH T OR IT IS A PURCHASE OF THE FEATURE FILMS. THE ASSESSEE CLAIMS THAT IT AMOUNTS TO PURCHASE OF FILMS SINCE THE SATELLITE RIGHT WAS GIV EN TO THE ASSESSEE FOR 99 YEARS. HOWEVER, THE REVENUE CLAIMS THAT IT IS ONLY AN ASSIGNMENT, THEREFORE, THE ASSESSEE HAS TO DEDUCT T AX UNDER SECTION 194 OF THE ACT. WE HAVE CAREFULLY GONE THR OUGH THE SO- CALLED ASSIGNMENT AGREEMENT DATED 15.07.2008. AS R IGHTLY SUBMITTED BY THE LD. D.R., THE PARTIES TO THE AGREE MENT WERE DESCRIBED AS ASSIGNOR AND ASSIGNEE AND NOT AS V ENDOR AND PURCHASER. THE AGREEMENT SHOWS THAT AN EXCLUSIVE R IGHT FOR BROADCASTING THE FILMS THROUGH SATELLITE TELEVISION WAS GIVEN TO THE 5 I.T.A. NO.1286/MDS/13 C.O. NO.158/MDS/13 ASSESSEE FOR 99 YEARS. IN FACT THE RIGHT GIVEN TO THE ASSESSEE IS DESCRIBED IN THE SCHEDULE TO THE SAID AGREEMENT WHI CH READS AS FOLLOWS:- RIGHTS : EXCLUSIVE COPYRIGHT FOR BROADCASTING OUR FILM THROUGH ANY SATELLITE TELEVISION BROADCASTI NG RIGHTS MEAN RIGHTS TO USE SATELLITES IN EXTRA TERRES TRIAL ORBIT TO BEAM DOWN A MICROWAVE SIGNAL TO SATELLITE ANTENNAS, DIRECT BROADCASTING, POINT TO POINT BROADCASTING AND ANY OTHER TELEVISION SYSTEMS AND REBROADCAST IN ANY TERRITORY OF ENTIRE INDIA ALONG WITH IT FOOT PRINT WHEREVER THE CHANNEL IS BEAMED WITHOUT RESTRICTION OF GEOGRAPHICAL AREA FOR A PERPETUAL PERIOD OF 99 (NINETY NINE) YEARS . 6. WHENEVER A PAYMENT WAS MADE BY WAY OF FEES FOR PROFESSIONAL SERVICE OR FEES FOR TECHNICAL SERVICE OR REMUNERATION FEES OR COMMISSION TO A DIRECTOR OF A COMPANY OR RE SPECTIVELY OR ANY SUM REFERRED TO IN SECTION 28(VA) OF THE ACT, D EDUCTION HAS TO BE MADE AT 10% OF THE SUM AS INCOME-TAX. IN THIS C ASE, THE ASSESSEE CLAIMS THAT IT IS NEITHER A FEE NOR A ROYA LTY. THE ASSESSEE CLAIMS THAT IT IS ONLY A PURCHASE PRICE PAID TO THE OWNER OF THE FILM. HOWEVER, THE REVENUE CLAIMS THAT WHAT WAS GIVEN TO THE ASSESSEE IS A RIGHT TO TELECAST A FILM FOR A DEFINITE PERIOD , THEREFORE, WHAT WAS PAID WAS ROYALTY. THEREFORE, TAX HAS TO BE DEDUCTE D UNDER THE PROVISIONS OF SECTION 194 OF THE ACT. WE HAVE GONE THROUGH THE DECISION OF THIS BENCH OF THE TRIBUNAL IN SHRI BALA JI COMMUNICATIONS 6 I.T.A. NO.1286/MDS/13 C.O. NO.158/MDS/13 (SUPRA). THE CASE BEFORE THIS TRIBUNAL WAS THAT TH E ASSESSEE IS ENGAGED IN PURCHASE AND SALE OF RIGHT OF SATELLITE MOVIES. HOWEVER, THE ASSESSING OFFICER FOUND THAT THE AGREEMENT ENTE RED BETWEEN THE PARTIES IS ONLY FOR ASSIGNMENT OF RIGHT TO THE ASSESSEE AND NOT SALE OF FEATURE FILM. THE RIGHT ASSIGNED TO THE AS SESSEE IS ONLY 20 TO 25 YEARS. THEREFORE, THE ASSESSING OFFICER FOUND T HAT WHAT WAS PAID BY THE ASSESSEE IS IN THE NATURE OF ROYALTY. HENCE, THERE WAS NO SALE AS CLAIMED BY THE ASSESSEE. HOWEVER, THE C IT(APPEALS) FOUND THAT THE ASSIGNMENT AGREEMENT WAS NOTHING BUT PURCHASE AGREEMENT WHEREBY THE ASSESSEE PURCHASED EXCLUSIVE OWNERSHIP OF SATELLITE COPYRIGHT BY VIRTUE OF PURCHASE. THOU GH THE ASSESSEE WAS DESCRIBED IN THE AGREEMENT AS ASSIGNEE, IN FA CT, THE ASSESSEE IS ONLY A PURCHASER. REFERRING TO EXPLANATION 5 TO SECTION 9(1)(VI) OF THE ACT, THE COMMISSIONER CAME TO A CONCLUSION THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX UNDER SECTION 194J OF T HE ACT. ON FURTHER APPEAL BEFORE THIS TRIBUNAL BY THE REVENUE, THIS TR IBUNAL FOUND THAT THE TRANSFER OF ALL OR ANY OF THE RIGHTS IN RESPECT OF ANY COPYRIGHT, INCLUDING COPYRIGHT FOR FILMS AND VIDEO TAPES USED IN CONNECTION WITH TELEVISION OR TAPES, WILL FALL WITHIN THE DEFINITIO N OF ROYALTY. WHAT IS EXCLUDED IS CONSIDERATION FOR SALE, DISTRIBUTION AN D EXHIBITION OF CINEMATOGRAPHIC FILMS. THE TRIBUNAL CAME TO A CONC LUSION THAT THE ASSESSEE DID NOT PURCHASE FEATURE FILMS AS SUCH THR OUGH THE 7 I.T.A. NO.1286/MDS/13 C.O. NO.158/MDS/13 TRANSACTIONS. THE ASSESSEE HAD ONLY RECEIVED RIGHT FOR SATELLITE BROADCASTING. THE TRIBUNAL CAME TO A CONCLUSION TH AT AS LONG AS THE TRANSFER OF RIGHT RELATES TO COPYRIGHT OF A FIL M, WHICH IS USED IN CONNECTION WITH TELEVISION OR TAPES, THE CONSIDERAT ION PAID WOULD BE ROYALTY ONLY. ACCORDINGLY, THE ASSESSEE WAS DUTY B OUND TO DEDUCT TAX UNDER SECTION 194J OF THE ACT. 7. WE HAVE ALSO GONE THROUGH THE JUDGMENT OF MADRAS HIGH COURT IN K. BHAGYALAKSHMI V. DCIT (2014) 265 CTR (M AD) 545. IN THE CASE BEFORE THE MADRAS HIGH COURT, THE ASSESSEE WAS IN THE BUSINESS OF SALE AND PURCHASE OF TELEVISION RIGHT F OR FILMS. THE ASSESSEE OBTAINED SATELLITE RIGHT AND ALL OTHER RIG HTS PERTAINING TO TELUGU FEATURE FILMS. THE ASSESSEE BEFORE THE HIGH COURT WAS GIVEN RIGHT OF TELECAST FOR 99 YEARS. THE ASSESSIN G OFFICER FOUND THAT THE ASSIGNMENT OF RIGHT FOR THE FILM FOR DEFIN ITE PERIOD WOULD COME WITHIN THE MEANING OF ROYALTY, THEREFORE, TH E ASSESSEE HAS TO DEDUCT TAX UNDER SECTION 194J OF THE ACT. THE TRIB UNAL BY PLACING RELIANCE IN ITS EARLIER ORDER IN K. BHAGYALAKSHMI ( SUPRA), FOUND THAT WHAT WAS TRANSFERRED TO THE ASSESSEE IS ONLY A RIGH T OF TELECAST FOR A FIXED PERIOD. THEREFORE, IT IS NOT A CASE OF PURCH ASE AND SALE OF THE FILM. HENCE, THE PAYMENT MADE BY THE ASSESSEE WOUL D FALL WITHIN THE DEFINITION OF ROYALTY. ON THOSE FACTS, THE H IGH COURT AFTER 8 I.T.A. NO.1286/MDS/13 C.O. NO.158/MDS/13 REFERRING TO AGREEMENT BETWEEN THE PARTIES, FOUND T HAT THE EXCLUSIVE RIGHT, INCLUDING THEATRICAL AND COMMERCIAL RIGHTS O F DISTRIBUTION, EXHIBITION AND EXPLOITATION WAS GIVEN TO THE ASSESS EE. THE HIGH COURT FURTHER FOUND THAT THE TOTAL CONSIDERATION PA ID BY THE ASSESSEE IS FOR ASSIGNMENT OF EXCLUSIVE RIGHT, INCLUDING THE ATRICAL, COMMERCIAL, DISTRIBUTION, EXHIBITION, SHALL FOR FIVE YEARS FROM THE DATE OF FIRST RELEASE OF THE FILM. APART FROM THAT, THE WORLD SA TELLITE RIGHTS, SATELLITE BROADCASTING SERVICE, SATELLITE TELEVISIO N BROADCASTING SERVICE, AND COPYRIGHTS ALSO STOOD TRANSFERRED IN F AVOUR OF THE ASSESSEE. SUCH TRANSFER WAS WITHOUT ANY RESTRICTIO N OF GEOGRAPHICAL AREA FOR A PERIOD OF 99 YEARS FROM THE DATE OF THE TRANSFER DEED. THE MADRAS HIGH COURT FURTHER FOUND THAT THOUGH THE AGREEMENT SPEAKS OF PERPETUAL TRANSFER FOR A PERIOD OF 99 YEA RS, THE COPYRIGHT OF THE FILM UNDER SECTION 26 OF THE COPY RIGHT ACT, 1957, SHALL SUBSIST FOR A PERIOD OF 60 YEARS FROM THE BEGINNING OF THE CALENDAR YEAR NEXT FOLLOWING THE YEAR IN WHICH THE FILM WAS PUBLISHED. THEREFORE, THE AGREEMENT IN THE CASE ON HAND IS BEY OND THE PERIOD OF 60 YEARS FOR WHICH THE COPYRIGHT WOULD BE VALID. THEREFORE, THE AGREEMENT BETWEEN THE PARTIES WOULD BE TREATED ONLY AS A SALE. REFERRING TO THE DECISION OF THIS TRIBUNAL IN THE C ASE OF SHRI BALAJI COMMUNICATIONS (SUPRA), THE RIGHT IN THAT CASE WAS TRANSFER ONLY FOR A PERIOD OF 20 TO 25 YEARS AND NOT OF PERMANENT NAT URE. THEREFORE, 9 I.T.A. NO.1286/MDS/13 C.O. NO.158/MDS/13 THE HIGH COURT FOUND THAT THE DECISION IS CLEARLY D ISTINGUISHABLE. ULTIMATELY, THE HIGH COURT FOUND THAT THE TRANSFER IN FAVOUR OF THE ASSESSEE FOR A PERIOD 99 YEARS IS SALE, THEREFORE, IT WAS EXCLUDED FROM THE DEFINITION OF ROYALTY. IN THIS CASE ALSO, AS WE HAVE EXTRACTED ABOVE FROM THE SCHEDULE, THE RIGHT TRANSF ERRED TO THE ASSESSEE IS TO TELECAST THE FEATURE FILM IN EXTRA T ERRESTRIAL AREAS FOR A PERPETUAL PERIOD OF 99 YEARS. AS FOUND BY THE HIGH COURT, THE COPYRIGHT SUBSISTS ONLY FOR A PERIOD OF 60 YEARS. THEREFORE, THE RIGHT GIVEN TO THE ASSESSEE BEYOND THE PERIOD OF 60 YEARS HAS TO BE TREATED AS SALE OF THE RIGHT FOR CINEMATOGRAPHIC FI LM. HENCE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE DECI SION OF THIS TRIBUNAL IN SHRI BALAJI COMMUNICATIONS (SUPRA) MAY NOT BE APPLICABLE TO THE FACTS OF THE CASE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE JUDGMENT OF MADRAS HIGH COURT IN THE CASE OF K. BHAGYALAKSHMI (SUPRA) WOULD BE SQUARELY APPLICABLE. THIS VIEW OF THE MADRAS HIGH COURT IS ALSO FOLLOWED BY A SUBSEQUENT DIVISION BENCH OF MADRAS HIGH COURT IN 252 ITR 310. 8. IN VIEW OF THE ABOVE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(APPEALS). BY FOLLOWING THE JU DGMENT OF MADRAS HIGH COURT IN K. BHAGYALAKSHMI (SUPRA) AND FOR THE REASON STATED THEREIN, WE UPHOLD THE ORDER OF THE LOWER AUTHORITY . 10 I.T.A. NO.1286/MDS/13 C.O. NO.158/MDS/13 9. THE CROSS-OBJECTION FILED BY THE ASSESSEE IS ONL Y IN SUPPORT OF THE ORDER OF THE CIT(APPEALS), THEREFORE, BECOME S INFRUCTUOUS. 10. IN THE RESULT, BOTH, THE APPEAL OF THE REVENUE AND CROSS- OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON 19 TH JUNE, 2015 AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) (. !'# ! ) ( . . . ) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 3 /DATED, THE 19 TH JUNE, 2015. KRI. . 4/56 76(/ /COPY TO: 1. ASSESSEE 2. ASSESSING OFFICER 3. - 8/ () /CIT(A)-VI, CHENNAI 4. - 8/ /CIT-IV, CHENNAI 5. 69 4/ /DR 6. ' : /GF.